This piece by Mark Ross-Smith, who until recently was head of the Malaysia Airlines frequent flyer program, is chock full of insights. He lays out a number of things that most frequent flyer programs aren’t doing, costing them real money, because they’ve gotten lazy — focused on little besides the revenue stream they’re earning from co-brand credit card deals.
- They don’t even drive program signups. I was surprised last year buying an American Airlines ticket for my in-laws that it’s not even possible to join the AAdvantage program during the ticket purchase process.
Consider adding an inducement for new members to join the program (eg: Air Asia offers MYR 10 off the flight ticket cost when joining as an Air Asia Big Member), or a points challenge to fast-track to a meaningful points balance.
- Lack of knowledge about potential business from members. How much of a customer’s wallet share does an airline get? Are dormant customers flying other airlines – but could be brought back with incentives? What kind of revenue can be raised by getting members to spend for the next status level? Ross-Smith says American earns $50 million from their status buy up offers.
He even suggests that there’s tons of value being left on the table between airline and bank partners. Does the bank let the loyalty program know when a customer cancels their card? Are loyalty members being leveraged for a bank’s private client or high net worth investment program?
[D]o you score members based on their ability to spend more? What if you knew a non-elite frequent flyer had 10million American Express MR points? That is potentially up to USD $50,000 revenue which could go to your loyalty program, or a competing program – at a moments notice.
Negotiating bank-wide agreements which don’t impose upon co-brand agreements can be hugely beneficial in extracting more value from the bank partner. Consider unique value propositions to help the bank achieve its goals. Does your loyalty program participate in private banking rewards (usually not available to the public) for banks to grow customer investment?
Virtual bank partnerships, ewallet and alternative payment, loans, mortgages, personal financing, bank retention data sharing… there are A LOT of opportunities with banks to build deeper business relationships.
He mentions “[a]ligning co-brand with status” as a way to get members to take the credit card but I think there’s something even more fundamental here. In a future where interchange rates fall, banks won’t be spending as much to incentivize transactions on their cards. How can cards be designed in the future to drive engagement without being as costly? I don’t think any cards in the world ‘ride the rails’ of their airline or hotel partners as well as the Frontier and Hyatt products, using the status benefits of the underlying program to promote spend on the product.